Thursday, August 11, 2005

Last week my colleague Jos Versteeg and I met Keimpe Algra, chief executive of Rotterdam based Enertel Wireless. This is a start-up exploring the possibilities for WiMAX in the Netherlands. Keimpe appears to be focused on the economic viability, as much as on the technology side of WiMAX.

It was a very insightful meeting, that can be summarized in this straightforward manner:

Wireless technologies beat both wired and cellular access methods in the broadband arena.

WiMAX is the most useful broadband wireless access technology.

Enertel Wireless is very well positioned to take advantage of these conditions.

First, the most important take-aways:

Cellular technologies cannot compete in the broadband arena. Cellular providers simply don't have the kind of spectrum it takes. UMTS and HSDPA will not change this. On the contrary, massive take-up of multimedia services would soon clog up their networks. Personally I would add: it remains to be seen if re-allocation of analogue TV spectrum to wireless technologies can make a difference. First, several technologies compete for this spectrum. And besides, remember how costly the UMTS auctions in Europe were?

Obviously, WiMAX has been hyped for a long time ('hysteria', according to ArcChart's Blueprint). CNet elected it 'Technology of the Year' in 2003. Still, it is hard not get excited over this fairly new technology. Performance data are often overstated. Wireless technologies are all, at some rate, dependant on distance to the base station, the frequency band used and the chosen power output. I would add that the distance dependance even goes for fixed technologies, such as DSL. Performance drops considerably after just a couple of kilometers.

Similarly, one has to watch out for non line-of-sight (NLOS) claims. Each wireless technology is limited by physical barriers, the rate depending on the frequency used and the distance. NLOS can only be guaranteed at distances up to 1.5 kilometers or so. But working with distances like these would wipe out much of the economic advantages of a wireless network, since it would require too many base stations.

Using licensed spectrum is an essental part of the WiMAX story. It makes spectrum scarce. This will prevent networks clogging up from usage by too may operators.

Vendors of proprietary non-standards may have really cool technologies, but these will never survive standards battles at the IEEE or any other standards body. Therefore, it makes a lot of sense to go with WiMAX: it has been ratified and equipment certification is happening right now. This is a condition for equipment (base stations and CPE) prices to drop, which will stimulate demand. Also, only when there is a standard will equipment 'talk together' (interoperability). This in turn will incentivise vendors to develop hardware, and so on and so forth. Personally I would add: the likes of IPWireless may go the way of iDEN. This proprietary cellular technology from Motorola is used by a.o. Nextel. But the merger with Sprint will see iDEN abandoned and replaced by CDMA (and in the mean time Sprint Nextel will have double network opex for keeping iDEN running).

About Enertel Wireless:

Enertel Wireless is a subsidiary of Enertel, which is the telecoms operator that was set up by the power utilities in the Netherlands. Enertel was first sold to British Energis, and subsequently taken over by Greenfield Capital Partners.

Enertel Wireless won one of two licenses for broadband wireless access (BWA) in the Netherlands in December 2003, for EUR 4m. The other license went to Versatel. EW's license is valid through 2015 and covers 80 MHz of spectrum in the 3.5 GHz band.

About WiMAX:

WiMAX is a broadband wireless access (BWA) technology. The IEEE way of describing WiMAX is 802.16. Last year, the 802.16d version (or 802.16-2004) was ratified. The next step is 802.16e, which will allow for mobility.

Maximum reach and throughput claimed to be 50 kilometers and up to 120 Mbps, respectively, are unrealistic. The system will have to be used by more than just one customer to make it economically viable. So, bandwidth has to be shared. Therefore it is much more realistic to think of WiMAX performance in terms of a range of 10-15 kilometers and a bit rate of 5 Mbps.

WiMAX can be used for broadband internet access, for WiFi backhaul and even for providing an uplink to a satellite system (which is by nature 'one way').

Finally, back once more to the main three arguments:

BWA: Broadband wireless access technologies have improved when it comes to bandwidth, reach, power consumption, spectrum efficiency and antenna technology. By now, there are some obvious advantages of BWA technologies versus wired access methods (copper/DSL, cable/DOCSIS, fiber): no digging up the streets, it takes just a few base stations to cover an entire city or region. Therefore, costs (both capex and opex) are lower and roll-out schedules are much shorter.BWA has an important advantage to cellular networks as well. The latter are constrained by the amount of spectrum they control.

WiMAX: BWA technologies can be divided into two classes: those aiming for WiMAX certification and those steering for their own proprietary technology.Pre-WiMAX technologies come from companies such as Aperto Networks, Navini Networks or Alvarion. Proprietary technologies are a.o.: UMTS TDD (mainly from IPWireless), Flash OFDM (from Flarion Technologies) and iBurst (ArrayComm, which by the way joined the WiMAX Forum). And then there are 4G efforts from NTT DoCoMo and probably lots more.WiMAX will have the advantages of interoperability: equipment being able to 'talk to one another'. Thus, service providers will not be in the hands of a single vendor.

Enertel Wireless: First of all, Enertel Wireless uses licensed spectrum. Second, BWA technologies function best in the 3.5 GHz band, which is allocated to BWA in large parts of the world.EW's strategy mirrors TowerStream's market approach, of which it makes no secret. Both use pre-WiMAX equipment (under the PacketMAX label) from Aperto Networks.EW competes directly with SDSL and focuses on the business market, at least for now. Its motto: 'more for less' (i.e. more bandwidth for a lower price).